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CMS Medicare Advantage rate hike ‘doesn’t move the needle’: AHIP

April 8, 2017
  • CMS decision to raise Medicare Advantage rates by as much as 2.95% “really doesn’t move the needle that much,” Cathryn Donaldson, director of communications for America’s Health Insurance Plans, told Louisville Business First.
  • Costs associated with administering MA plans typically increase by about 2% to 3% each year, according to Donaldson.
  • MA has been good business for some payers, like Humana, which took in $36.1 billion in gross revenue from MA plans in 2016 and announced plans to expand its presence in the MA market.

Enrollment in MA has steadily increased in recent years and many payers want a piece of the pay. While the market may look appetizing, there are barriers to entry, especially as companies with an oversized presence seek to expand their control.

Enrollment in MA plans has increased from 9.7 million in 2008 to 17.6 million in 2016, according to the Kaiser Family Foundation (KFF). Almost a third of Medicare beneficiaries are covered through an MA plan. In five states, more than 40% of Medicaid beneficiaries are covered through MA.

A desire to get in on the MA market was a driving factor in the decision by Aetna to pursue a merger with Humana. The merger was blocked because it would reduce competition in MA markets. Humana, along with UnitedHealth, is one of the largest providers of MA health plans. The two payers combined accounted for 39% of MA enrollment in 2016, according to KFF.

As the MA market continues to expand, other payers are understandably intrigued (maybe they heard the recent MA ads on Spotify). However, gaining a foothold is not easy, according to a report from Milliman. There are numerous regulatory and financial requirements, as well as pressure to manage claims costs and minimize administrative costs for new entrants.

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